It should include the global economy, macro economic indicators, a brief summary of what G7, BRISCA, Open Economy and Developing Economy is and the reason why you are choosing these 4 countries for the assignment, for example because USA is the largest economy in the world. E.t.c
The present day global economy is growing at a moderate rate. The growth of the gross product across the world is estimated at about 2.8 percent for the year 2015 and then it is predicted to increase to about 3.1 percent in the year 2016. There is a wide difference in the growth rates of different countries. The commodity producing nations such as Brazil are expected to grow at a negative growth rate whereas developing economies such as China and India are expected to grow the rate of 6 to 7 percent per annum. The global commodity price is predicated to continue to be low and the bear market principle may continue for some more time. Hence, commodity producing nations like Brazil will continue to underperform. On the other hand commodity importing countries are at a benefit due to reduced prices and continuously decreasing inflation. The developed economies are improving but the recovery is still facing the brunt of the effects of the global financial crisis. The Oil prices are also on a downward trend and are at six year lows and as a result oil producing countries like Saudi Arabia also face downside (Nations, 2015). Another downside to the present global economy is monetary policy of the Federal Reserve and the effect that it could have on emerging nations and across the world. Also the quantitative easing of the euro and uncertainties in Greece also may have its own diverging affects on the world economy. Finally, the broad based limitation with respect to investments may inhibit higher growth across the world economy. The G7 is group consisting of advanced nations like Canada, France, Germany, Japan, Italy, United States and United Kingdom along with the European Union. These Economies represent about 64% of the overall wealth of the globe. The representatives from these countries meet at semi –annual or annual intervals to discuss the economic situation in their countries as the state of these economies may impact all nations of the world. They also take decision on helping indebted nations with may require financial help to sustain on the long run (Wikipedia, 2015). Similarly, the BRICSA group consists of developing or emerging nations like Brazil, Russia, India, China, South Africa with Argentina being the latest entrant. These economies have a different set of problems like a depreciating currency against the dollar and fighting inflation and price rise (Desai, 2012). The four nations that have been chosen for the Analysis are United States, China, Turkey and Nigeria. These nations have been chosen because each of them is a different stage. For example US is the one of most developed and the largest economy. China on the other had is the most populous nation, an emerging nation and is considered to be the world largest exporter of manufactured goods. Turkey is considered as an upper middle income country. Some economists view it as a newly industrialized country whereas others see it as a developed nation. Nigeria is on the other hand an underdeveloped country in its infancy stage. Hence, each of these nations have their unique successes and problems to deal with. Hence, in order to get a diverse view of the world we have carefully chosen the above four countries. The macroeconomic performance, international trade and investment
indicators – United States
With respect to the macroeconomic indicators we will examine the Gross Domestic Product (GDP), the GDP growth and the Inflation for the three year period from 2011 to 2013. The GDP of United States according to the world bank data was about 15,518 Billion USD in the year 2011 and grew to be about 16,758 Billion USD in the year 2013. In terms of the GDP growth rate, it was about 1,6% in 2011 and increased marginally to about 2.2% in 2013. The growth rate suggests that US is still growing a small pace but has marginally improved. The growth rate however, is in line with the growth rate of most developed nation. The inflation on the other hand is decreasing which suggests that the economy still faces deflationary forces. The Federal Reserve in the US is looking to increase the interest rates in its monetary policy if the inflation hits 2 percent. The strength in the US dollar and its appreciation against major currencies shows that the economy is strong (Economics, 2015). With respect to its imports and exports, we can see from the data the US imports marginally more than what it exports. Since the imports are slightly more than the exports we can say that there trade deficit. This trade deficit is due to the loose monetary policy and an improving money supply. Trade deficit can be considered good since it will lead to increase in the income generation, improved confidence and better investment opportunities. With respect to the investments we can see that the net FDI Outflow are more than inflows which suggests that foreigner are looking at better avenues outside of US to invest their money and generate higher returns. This trend may reverse if there is a change in the monetary policy stance and interest rates increase. This may pump the money back to US as interest rates would be attractive. The macroeconomic performance, international trade and investment
indicators – China
The growth rate of the gross domestic product in China is seen to reducing from 9.5% in the year 2011 to about 7.7% in the year 2013. China is considered the biggest emerging economy and is growing at the fastest pace across the world. However, China is one of the biggest commodity producers and well and due to the soft commodity prices over the recent year; the growth rate of the country is seen reducing. The Inflation of the other hand is also on a downward spiral and hence the Chinese central bank is seen reducing interest rate in order to improve the growth rate With Respect to the imports and exports we can see that exports of the country Is higher than that of the imports. This suggests that China has a trade surplus quite opposite to that of the US. China is a major exporter of goods to US and also to the African subcontinent. Trade surplus generates a constant flow of money to the country and is considered a positive for growth. The investment also can be seen to be improving. As we can see from the data, the net FDI inflow is greater than outflow which indicates that China is a favourite destination for parking global funds and is poised to be the largest economy in the world and surpass USA. The macroeconomic performance, international trade and investment
indicators – Turkey
The growth rate of the gross domestic product has declined sharply from 8.8% in the year 2011 to about 2.1% in 2012 and has slightly improved to about 4.2% in the succeeding year. The sharp decline in the growth shows a slowing economy and the country may move into recessionary period if steps are not taken to improve the growth rate in the following years. We can also see that there is a marginal increase in the inflation over the three year period. This suggests that the currency, namely the Turkish lira is seen to depreciating and leading to an increase in the general prices of imported goods (Government, 2015). Furthermore, the imports are higher than the exports by a considerable margin, suggesting that the country is facing a trade deficit. This may lead to money flow out of the country and the currency further depreciating and leading higher inflation which in turn leads to lower growth. Hence regular monetary policy review has to be conducted by the Turkish central bank and depreciation of the Turkish lira should be reduced as it pulls down the purchasing power of the local Turkish population in the world. Imported goods will become dearer and the per capita income will be seen to be reducing in terms of dollars and other stronger currencies. The macroeconomic performance, international trade and investment
indicators – Nigeria
Nigeria as a country is still considered “Developing” and is also said to be in its “infancy” stage. We can see that there is been a marginal growth in the gross domestic product of the country over the three year period suggesting that the country is undergoing a moderate pace of expansion. Due to massive floods that affected nearly the whole country in the latter half of the year 2012, the growth rate for that year is seen decreasing slightly. However, overall the country is making progress in terms of improving the infrastructure and livelihood of its citizens (WorldBank, 2015). The inflation is also on a downward trend from the year 2011 to 2013, except for a spike in the year 2012. This spike in the CPI inflation can again be associated with massive floods in the country and the rise in prices of foods and other essential commodities due to lower production. However, a tight monetary policy flowed by the central bank of Nigeria has helped bring down the prices to a great extent and keep inflation single digits. We can see that the exports are more than the imports creating surplus which also helps ease inflation. The FDI investments are also seen increasing due to increased spending by government in the infrastructure segment.
Comparison of the four countries in terms of GDP growth
The below graph illustrates the movement of GDP growth over the three year for each of the
We can see that the GDP Growth rates that US is growing, but a slower rate. China’s growth is the highest among all the four countries; however, it is seen to be reducing due to lower commodity prices. Turkey’s GDP is seen a drastic reduction due to a highly deprecating currency and increased slowdown in general. Nigeria on the other hand is moderately expanding over the three year period.The movement in the GDP growth should be seen across 8-10 years for a country to see as to whatcycle of economy the country is in. However, with the limited data available, we can conclude theabove regarding the growth in the gross domestic product.